Correlation Between Fairfax Financial and Winpak
Can any of the company-specific risk be diversified away by investing in both Fairfax Financial and Winpak at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fairfax Financial and Winpak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fairfax Financial Holdings and Winpak, you can compare the effects of market volatilities on Fairfax Financial and Winpak and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fairfax Financial with a short position of Winpak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fairfax Financial and Winpak.
Diversification Opportunities for Fairfax Financial and Winpak
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fairfax and Winpak is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fairfax Financial Holdings and Winpak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winpak and Fairfax Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fairfax Financial Holdings are associated (or correlated) with Winpak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winpak has no effect on the direction of Fairfax Financial i.e., Fairfax Financial and Winpak go up and down completely randomly.
Pair Corralation between Fairfax Financial and Winpak
Assuming the 90 days trading horizon Fairfax Financial Holdings is expected to generate 1.26 times more return on investment than Winpak. However, Fairfax Financial is 1.26 times more volatile than Winpak. It trades about 0.21 of its potential returns per unit of risk. Winpak is currently generating about 0.05 per unit of risk. If you would invest 168,382 in Fairfax Financial Holdings on August 28, 2024 and sell it today you would earn a total of 28,702 from holding Fairfax Financial Holdings or generate 17.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fairfax Financial Holdings vs. Winpak
Performance |
| Timeline |
| Fairfax Financial |
| Winpak |
Fairfax Financial and Winpak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fairfax Financial and Winpak
The main advantage of trading using opposite Fairfax Financial and Winpak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fairfax Financial position performs unexpectedly, Winpak can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Winpak will offset losses from the drop in Winpak's long position.| Fairfax Financial vs. Intact Financial | Fairfax Financial vs. iA Financial | Fairfax Financial vs. TMX Group Limited | Fairfax Financial vs. Onex Corp |
| Winpak vs. Globex Mining Enterprises | Winpak vs. Guru Organic Energy | Winpak vs. Aya Gold Silver | Winpak vs. Metalero Mining Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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